Falling Renewable Energy Prices and the Future of Mining Operations

Cost, ESG Standards, and the Trend to Renewable Energy in Mining

An August 2018 commentary from the risk management company Fitch Solutions is predicting a major shift in the mining industry away from traditional fossil fuel power sources. Both on and off-grid mining operations today rely chiefly on diesel-powered or fossil-fuel based energy.

They also noted that companies operating in the Americas are in the best positions to take advantage of "fast-falling costs" for renewable energy technology. Solar and wind power technology is advanced enough now to be deployed cost-effectively on an industrial scale.

The mining industry has found itself under increasing pressure to meet rising ESG (economic, social, and governance) criteria. Corporate ESG oversight and risk has come under global scrutiny for investors and is crucial in the mining industry,according to sustainability investing expert Michiel van Esch.This social pressure combined with increasingly competitive pricing for wind and solar power alternatives is set to drive the change according to the Fitch Solutions report, but energy cost-savings is the primary driver.

Energy costs for mining operations using grid electricity, coal, diesel, or natural gas can run up to 30% and are likely to increase as operators move to more intensive mining techniques as ore reserves approach depletion. New, more scalable wind and solar power technologies can provide more reliable power with significant cost savings, setting the stage for a major move in the mining industry.

While wind and solar are set to dominate the renewable energy market,hybrid combinationsof the two technologies working in parallel with diesel generators (gensets) can be configured to suit specific site wind and irradiation conditions.

And, as it turns out, renewable energy technology can also offer a way for mining companies to put old mines back to work.

A Second Life for Legacy Mines

They're called theSunshine For Minesteam (SFM), the Rocky Mountain Institute's group of experts dedicated to turning closed mines into independent power plants, power storage facilities, or grid-service providers. Legacy mines have been a burden on mine operators who are still responsible for maintaining the sites long after production has tapped out.

Contamination from previous mining activities can prevent any further productive use of the mine, leaving the owner with an ongoing long-term liability. Renewable energy can provide the solution which converts that liability into an asset by creating a new revenue stream for old mines.

The SFM team focuses on locating sites with the highest solar, wind, and alternative resources and recommends innovative construction which optimizes the levelized cost of energy (LCOE) while reducing environmental impact. The team also provides an analysis for all location-specific offtake options for the mine's power production, since revenue for electricity sales varies contractually depending on location.

While the initial capital expenditure can be high, the actual operating expenditure is very low when compared to any other technique for generating electricity. The SFM team can also offer assistance in making these legacy mine power projects attractive to investors, mining companies, and developers with suggestions for site prioritization and creative financing.

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